I recently received this letter through a series of email forwards and wanted to expand and comment on the effects of currency crises that I have experienced in various countries. I thought that by posting this letter I could continue my thoughts on currencies in a subsequent blog post. Here is the letter that I received, posted here with the author's permission.
My apologies for this letter being late - it was completed on the 28th,but couldn't be sent due to circumstances beyond my control. Last Wednesday,I entered the bank to find a crowd of people not queueing for the tellers. I asked a teller if there was cash and she said no,so I asked if they were expecting cash, and she said yes,but when,she couldn't tell me. And so we entered the third week without cash. In any other country,the populace wouldn't put up with this,and would be setting fire to cars in the street,but Zimbos just shrug their shoulders and put up with what is unputupable with. People with bank cards and bank accounts can write cheques (I haven't written so many cheques since 2003,when we last ran out of cash,before Gono became governor of the RBZ) or produce and swipe bank cards in suitably equipped retail outlets in this way,I bought $105.6 million-worth of pool chemicals,enough to last nearly six months. People without bank accounts must find cash from somewhere,but where,I don't know. Dr.Gono professes to know nothing,but if he,the man who prints the money doesn't know,who does? It is suggested that they are going to produce notes of $500,000 or even $1 million (which would be worth 16-25p!),but wheres the use of that? Inflation is eroding the value of the notes faster than the ink can dry it is reported reliably that for transactions involving telegraphic transfers,a pound will buy Z$6 million,or Z$1 million is worth 16.66p. If you are buying Zim cash,the exchange rate is half that,owing to the shortage of cash.
Chile spent 20 years under the dictatorship of Augusto Pinochet,but at least he ran the economy well he brought in reforms which benefited the country and acted as an example for other South American countries on how to run economies. When,at last, Pinochet stepped down,he left the country in a healthy financial position. In contrast,The Mad Hout was originally elected legitimately,but has destroyed his country in 7 years,and there is not the slightest chance that he is going to step down. As elections approach,he trusts that the old tricks of rigging elections will stand him in good stead,and believes the mealy-mouthed courtiers who assure him that he is popular with his citizens God knows, hes tried to restrict the number of dissenters by barring many from citizenship, and his policies have gotten rid of another large chunk of nay-sayers by forcing them into economic migration. Nonetheless,as a South African newspaper said at the last election,to vote for him,the people would have to want 5 more years of poverty,unemployment, and shortages. To the commodities not available 5 years ago has now been added pretty much everything,with empty shops,empty filling stations,and now,it seems,empty banks, not to mention the outages of water and electric power. Who could possibly want more of that?
A landmark of sorts was passed on Thursday when I got Z$4,000,000 for a pound in Zim, you can be a millionaire for 25p or US51! And the day before,Gideon Gono had to explain that the NIPC (National Incomes & Prices Commission) didn't really mean it when it said that imported goods would be priced at cost plus 50% converted at the official rate they had been misreported. Godwills (compared to Godzilla in his destructive power) Masimirembwa was present while this unconvincing explanation of his foolishness was propounded, and said that it hadn't been his intention to bar imported goods from the shops (what did he intend? did he think it through?). Gono went on to say that price blitzes like three months ago would be severely punished (unlike the last one) and that we needed imported goods while local production was re-established with the help of money from the RBZ. I have to say Ive seen little sign of this production ever since last week, Delta Beverages Graniteside depot has been stone empty,and other producers seem similarly to be failing.
Delta Beverages has a big sign saying, Cheques only accepted by prior arrangement,so I had to get permission to pay them by cheque. The black market is a different matter the average street trader doesn't accept cheques! Restricting cash will stamp out the black market,but how then will we access necessities? In 2003,I remember buying a stone carving with a cheque the seller took my details and then swapped the cheque for cash with the TM supermarket across the road,but that was then,and this is now. Gono hints at a new currency - perhaps hes waiting till he can make the new dollar worth a million old ones it would clearly make things easier to shift the denomination by multiples of three by now, we've got beyond a new dollar being worth 1,000 old ones there would still be 2,000 to a US dollar,but 2 to a US$ would mean reintroducing coins,which are expensive to make,and the coins would cost more to produce than they were worth in face value. The problem with trying to stamp out the black market is that there is considerable collateral damage to society when the people are deprived of the ability to conduct normal trade just now,well be back to corry shells,or barter! If there were enough of them,trade would be conducted in US$ or ₤ - certainly,prices are quoted in them.
The Independent reports that 90% of bakeries in the country have closed. The reason is that the NIPC insists on denominating prices as they wish them to be as opposed to what they are. Wheat costs Z$1 billion a tonne instead of the gazetted price of $100 million, and fuel prices are still gazetted at $60,000 a litre instead of the true price of around $2.3 million. Thus,the cost to produce a loaf of bread is $400,000 to $500,000, while the NIPC has just raised the approved retail price from $100,000 to $200,000. Over the past 4 months,standard loaves have disappeared, to be replaced by Fancy Bread of one kind or another,or rolls. The supermarket in Strathaven used to make rolls which had long queues waiting for them to come out. However,on Monday I found their bakery shelves full of rolls,and no queues the rolls were in packs of 4, priced at $600,000, and it looked like,at last,this price was encountering consumer resistance. With our magistrates striking because their monthly salary of $20 million cant support them and their families,it is easy to sympathise that would buy just one pack of rolls a day for 33 days,leaving nothing over for rent,and all the other necessities. The government says it cant afford to pay them more,and yet it seems able to come up with the money for fancy cars for traditional chiefs,and military and political chefs. I haven't seen the term Failed State defined,and every country which has been so described has had civil war somewhere in its past,but it seems to me that present-day Zim is a failed state. Just because there isn't turmoil on the streets doesn't mean all (or anything) is well. Once again I wonder at the docile acceptance of the unacceptable!
When my sons were little,I bought a Peanuts poster showing the lugubrious Charlie Brown with his dog,Snoopy,and the rubric, No problem is so big or so complicated that it cant be run away from. That's our government they seem to hope that if they refuse to recognise the existence of problems, they will go away! The only person who seems to be aware of the problems,is Gideon Gono,who isn't even in the government.
As inflation gathered pace back in July,department stores stopped credit sales. Hitherto, these had allowed customers to buy with zero deposits and pay the balance over 3 6 months. Obviously,with an inflation rate like ours,despite the payment coming to 200% of the original selling price,the customers were still winning. Now,it is said, Gono has leant on the stores to reinstate credit sales,and they have agreed to do so, but with a repayment period of 3 4 weeks tops!
And just to add to the sense of isolation,Zambian Airways have cancelled their daily flights between Lusaka and Harare effective the end of this month,saying they don't make a profit on the route. There cant be many carriers left still flying into Harare other than Scare Zim,and they cant be making a profit either!
Here are today's supermarket prices the prices on 31.10.07 are in brackets. Then, a pound bought Z$2 million - my latest rate was $4 million (+ 100%). Changes are expressed as percentages,and n/a means not available.
Eggs: $2.4mill/dozen large ($480,000 9 weeks ago - +400%)
Gouda Cheese: n/a
Milk: $400,000/litre ($165,000 - + 142%)
Potatoes: $730,500/kg ($495,500 - + 47%)
Fat-free mince: $9mill/kg ($1.2 mill/kg 9 weeks ago (not fat-free) - + 650%)
Mealie meal: n/a
Cooking oil: n/a
Tomatoes: $980,000/kg ($362,500 - + 170%)
Bananas: $830,000/kg ($370,000 - + 124%)
Sausages: $21,200,000/kg ($1,610,000 - + 1,118%)
It can be seen that prices have,with one exception,more than doubled (in some cases,very much more!) in four weeks. The sausage price I had to read three times,following the figures with my finger because I could scarce believe that it had gone up so much in 4 weeks (the price was $10,600,000 for 500g). For sausages to cost 2 times what mince costs seems ridiculous perhaps its the cost of the unavailable bread! Eggs,although still sold by the tray,were quoted to me at $200,000 per egg! (which,at Z$4 million to ₤1,means an egg costs 5p.) Petrol from the pirates beside the filling station in Avondale costs $11.5 million for 5 litres,up 92% from 4 weeks ago.
On Monday,turning over in my mind what I could possibly find as an upbeat note on which to end this letter,I went to The Cheeseman on the scooter,and there it was the happiness of riding along Sherwood Drive in my shirt sleeves under a canopy of flamboyant trees in bloom,while above that canopy,the sun shone out of a blue sky with fleecy white clouds. I compared this with the last time I was in Britain in November,when the skies were grey and releasing unceasing drizzle,and the weather was cold and miserable (as was I!). Yes, Zim still has something to be said for it!
And on that note, let me take my leave! Richard